SEC rules that Calif. IOUs are securities.
In addition to the antifraud provisions of the federal securities laws, other parts of the federal securities laws also apply to the purchase and sale of the IOUs, according to the SEC. Persons acting as intermediaries between buyers and sellers of the warrants may need to register as brokers, dealers or municipal securities dealers, or as alternative trading systems or national securities exchanges.
"The IOUs are obligations of the state of California, are negotiable, and bear interest. The staff's view that the IOUs are securities does not affect California's right to issue or repay the IOUs," the commission said.
Broker-dealers, as well as any potential secondary markets, should be aware that the requirements of the securities laws and the rules of the Municipal Securities Rulemaking Board apply to the IOUs, according to the SEC.
The agency said although the IOUs are labeled registered warrants, they are not registered with the SEC. There is no registration requirement that applies because the IOUs are municipal securities.
Many credit unions in California have said they will honor the state IOUs, while banks placed a time limit on accepting them.
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|Publication:||Credit Union Times|
|Date:||Jul 22, 2009|
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